Asian stocks advanced, led by financial and energy shares, after South Korea’s government announced Asia’s biggest financial rescue package and oil prices climbed for a second day.
Hana Financial Group Inc, which controls South Korea’s fourth-largest bank, surged 8.4 percent after the government guaranteed US$100 billion of lenders’ foreign-currency debt.
Fubon Financial Holding Co (富邦金控) added 6.7 percent after agreeing to buy ING Groep NV’s life insurance unit in Taiwan.
“Government policies enacted so far have been enough to make sure that the worst of the panic is behind us,” said John Vail, who helps oversee about US$118 billion as global strategy head at Nikko Asset Management Co. “We do feel uncomfortable being underweight equities when valuations are so low.”
The cautious buying of equities did not translate into a move out of government bonds, with Japanese government bond futures climbing and US Treasury futures nearly unchanged on the day, suggesting investors were still reluctant to take risks.
Governments around the world rushed out further steps to help the private sector, pledging so far well in excess of US$3 trillon to try to stabilize financial markets and resuscitate the banking industry which has been badly damaged by a crisis of confidence.
“A slew of recent policy actions worldwide has provided some relief to the banking sectors in the major economies,” said Kengo Suzuki, a currency strategist at Shinko Securities in Tokyo. “But the state of the market remains very fragile with worries mounting about the global economy and emerging markets,” Suzuki said.
The MSCI index of Asia-Pacific stocks outside Japan rose 1.2 percent. The index suffered a seventh consecutive week of losses last week and remains down 52 percent so far this year.
Hong Kong’s Hang Seng index jumped 2.2 percent, but is down 17.3 percent so far this month.
Japan’s Nikkei average edged up 0.5 percent, though it is down 19 percent this month.
South Korea’s KOSPI fell 1.9 percent, weighed down by stocks with large exposure to global economic trends such as Hyundai Heavy Industries and steel maker POSCO.
Shares of brokerage Mirae Asset Securities, which has a focus on emerging markets, were down 15 percent on market talk of a possible downgrade.
The South Korean government’s rescue package modestly pushed up the won against the US dollar, but analysts said the steps would unlikely be strong enough to reverse what has become a fierce downtrend in global equity markets.
“Korea remains particularly vulnerable to the global credit squeeze/deleveraging, and the economy is doomed to decelerate significantly along with the global recession,” Calyon strategists said in a note.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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